Tribunal favoured over ACCC to clear mergers

Fewer mergers and acquisitions as a result of tough economic conditions and a decline in business confidence have led to a surge in favour of the Australian Competition Tribunal to clear tie-ups, according to legal experts in the field, rather than the Australian Competition and Consumer Commission.

Gaining mergers clearance was also hard because of the regulator’s unwillingness for further concentration in particular industries.

Clifford Chance partner
Dave Poddar
agreed, saying the tribunal’s attractiveness was evidenced by AGL’s application to overturn the regulator’s rejection of its Macquarie Generation takeover, as well as a withdrawn application by Murray Goulburn Co-operative of its failed bid for Warrnambool Cheese and Butter.

The Australian Competition Tribunal was now a more attractive forum to clear the more complex mergers knocked back by the ACCC, he said.

He says the determination time of around three months for cases was more commercially realistic for time-sensitive takeovers than the ACCC’s more lengthy process.

The tribunal can review decisions made by the regulator, but is also viewed as an alternative way to achieve clearance for large and complex mergers. Unlike the tribunal, the ACCC can also give informal but non-binding clearances.

“This is resulting in at least the AGL/Macquarie Generation merger being ‘shoe-horned’ into a merger application arguing public benefits in order to fit more closely into the tribunals jurisdiction, rather than the more substantive issue of whether there is indeed a substantial lessening of competition in the relevant market," Mr Poddar said.

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Like many competition watchdogs overseas that were regulating concentrated industries, the ACCC was also focusing on market behaviour, including misuse of market power, consumer protection and unconscionable conduct. This includes cases against Cement Australia, Visa and Pfizer.

Businesses were awaiting the root and branch review of competition law as to whether a purpose and effects test for misuse of market power should be established.

“If it becomes an effects test in addition to whether the conduct had an anti-competitive purpose, it may become harder for business to determine the effect of their conduct and determine what is lawful conduct, which may stultify aggressive but overall pro-competitive conduct."

Allen & Overy partner Peter McDonald says merger volumes improved from last year, in Australia and across the Asia Pacific, although confidence was holding many back from achieving a final point completion.

Gilbert + Tobin partner
Luke Woodward
says there was a question as to whether the ACCC was aligning its clearance timetable with overseas regulators. There were concerns in the industry, Woodward says, that the time for mergers to be approved was increasing, creating friction between the ACCC and merger parties.

This was despite the regulator’s issuing of a pre-assessment phase for matters that do not raise significant competition concerns to be dealt with in a quicker time frame.

“The key is whether they’ve been able to implement a process to deal with the less complex cases more quickly," he says.

The Australian environment is more mature than many of Australia’s Asian neighbours, says Allen & Overy partner
Peter McDonald
, including Malaysia, Singapore and Indonesia.

Cartels were often international, and there is a heavy reliance on leniency programs and associated requirements for companies to cooperate, irrespective of where evidence and people are located.

Just as Australia, Japan and Canada have often piggy backed on cartel evidence and enforcement tactics in Europe or the US, newer regulatory regimes in places like Malaysia and Singapore would also learn from Australia’s efforts in running cartel cases.

“Having a well developed regulatory engagement strategy at an early stage is important."

John Kench
, chairman at Johnson Winter & Slattery, believes a root and branch review of competition laws would not solve a whole lot of industrial policy issues. “The mandate for the review is incredibly wide," he says, adding that it appears to target individual companies rather than systemic issues.